Minutes of Public Policy Committee - 3 April 2008

Present: David Farrar (Chair), Hamish McEwan, Chris Streatfield, Simon Riley, Peter Macaulay. (By Phone): Rick Shera, Judy Speight, Michael Wallmannsberger.

In Attendance: Keith Davidson, Richard Wood, Jordan Carter.

Apologies: Sam Sargeant, David Diprose.

Opened: 3.05pm.

1. Minutes of Last Meeting – 6 March 2008

Minutes of last meeting adopted as a true and accurate record.

2. Action Points / Matters Arising from the Previous Minutes

Two page ENUM report was circulated to the Committee.

Press release about Cyberlaw fellow still pending – delayed from Vic Uni side.

Staff will still write to Judith Tizard, no meeting yet with Cunliffe, no broadband investment meeting yet.

David still to create a legal jurisdiction paper, Copyright Bill not yet advanced although SOP has appeared.

[AP - Staff - check with Judith’s office the intended progress with copyright bill]

3. InternetNZ underlying position on Fibre

Jordan presented a Broadband Investment paper for discussion, setting out the perceived problem and adopting a conventional welfare economics framework to analyse both the problem and to suggest possible solutions.

Discussion covered many points, including the following assertions and arguments:

The problem is not a shortage of capital but a shortage of investment. Investment or telco thinking is the problem as they don’t see the business case stack up.

The market will not invest enough at this point in the time frame we deem desirable. While we have to look on the revenue and investment side, a factor is the cost side and there is a lot the Govt can do to require local govt to facilitate to lower the cost, which may help. If you get that right you will speed up some commercial investment.

Fibre To The Node can be the motorway. You still need a road rather than a mud track to people’s driveway. What might appear to be a motorway now won’t be in the future.

The term ubiquitous enables us to be technically neutral and avoids setting 75 per cent or 85 per cent limits. Available anywhere - anyone is able to have access.

MED think there is a $1.4 bn investment gap to get to targets and that is what they are working to. When you mention higher speed targets that is outside their thinking.

Great not to say fibre but let’s put “fibre-equivalent”

Problem can be fixed by reducing risk, increasing return or non-market investment.

To do this can use demand aggregation and creation, regulated monopoly, subsidy/public investment, or removing local govt barriers, and private investment in your own part of the network – including local and regional approaches.

Is it a nation building problem, or simply an economic issue? Will New Zealand Govts do it as a nation building exercise? That option either way should be the first decision.

It’s unlikely any NZ Govt would see it this way but it may be worth making it clear that that was a part of the decision tree, and advocating that approach to Government.

If you treat it as nation building it doesn’t change the document but does affect how we frame our election campaign.

Speculation is of something in the budget for broadband and we will need to work out how to respond to that.

NZ Institute proposal is a combination of regulated monopoly and public investment. The Fibre Fund is a demand aggregation/creation approach. There is no conflict between the two, they are complimentary. If there is support for the NZI proposal it could be accelerated by the Fibre Fund.

The issues that come up are about monopoly and making sure also that we don’t cut out wireless and appear to be fibre fanatics. Fibre can’t be mobile.

There is a model of individual householders choosing to buy their last mile at a subsidised cost.

4. The NZ Institute Proposal

NZ Institute report doesn’t demonstrate that they have yet looked at alternative models. Simon asserts there are three models: Swedish – looking at building out urban fibre networks, with open access backhaul networks; Alberta – extending fibre access everywhere using private access and non-compete with existing telcos; nation building model in Australia – consortium vs Telstra bidding. There may be other models.

Jordan, DPF and Richard are meeting with David Skilling to discuss and will try to get more knowledge of what they have looked at.

The financial models used for delivering these services is not always clear, particularly in Northern Europe. There are many things we can learn from and regardless of whether a model fails you still have the infrastructure. You have to be careful of what we call a failure – can be operational rather than quality of infrastructure.

We already have a bottom up model with for example Palmerston North, FX Networks and Broadband Challenge.

Note that Bernard Hickey blogged in support of the monopoly option put up by NZI, and Rod Drury has endorsed it.

We should make to a statement either endorsing or qualified support, or welcome addition to the debate.

[AP – Staff – Release welcoming Skilling report]

The key element that holds FibreCo together is the effective monopoly – could be a statutory monopoly. Would have to meet requirements, invest in network and expanding out.

Would such a monopoly cause problems for people running their own fibre and what happens to fibre competitors?

If we accept that fibre is a natural monopoly then that starts to define the debate very quickly. Layer 1 not sure, but Layer 0 is.

Is installed fibre a natural monopoly – you can always fit two fibres in a duct.

If you don’t accept it then the prospect is over overbuild or duplication of infrastructure or the way forward is in facilities competition and it is up to the market place to determine.

We’re too small for too many infrastructure players but you hope the market will deal with overbuild.

The problem is the term natural monopoly and what that means in respect to fibre. And all parts of the network need to be treated differently.

NZI is saying monopoly on access. Are they planning to ban Wimax!

We don’t know whether just putting a network in fibre without making it a monopoly would work. If we had FibreCo without being a “state monopoly” then the market will choose it.

[AP – Staff - publish questions to Skilling to list for more questions and discussion]

[AP – David, Staff – report back from Skilling meeting]

[AP – Staff – invite Skilling to a Council or Public Policy meeting]

5. Election Campaign Project

Waiting for Saunders Unsworth to come back.

6. Submissions to Approve: Digital Broadcasting Regulation
and Digital Content

Richard reported - discussed broadcasting review process – submissions due Friday.

David reported - This review will be followed by an options paper and potentially legislation – that is optimistic. Pre election is unlikely but hasn’t been ruled out.

Looking at the complexity of it would be surprised if there was must action.

Our aim is to be at the table and ensure understanding of the Internet.

TUANZ are doing a submission. NetSafe is doing a submission.

Have met with the Press Council and ASA.

Simon – who do we need to educate in Government etc. Would be supportive of a useful think piece 8-10 pages that takes an aerial view of the issue of convergence and what are the implications for the content industry – commissioned externally. Would like to see 1 page document showing summary of research in submissions.

The Committee approved the submissions for lodging with the Ministry.

[AP – Richard – File submissions]

7. NGN Conference

Conference next week – Jordan, Richard and Jamie attending.

Submission has been made on the NGN Terms of Reference review and Jordan will take this into account in his speech insofar as it is relevant to the topic of his panel.

8. Rural Broadband Working Party

We have the notes taken by Frank in the rural workshop at the Local Government Broadband Forum, and we’ve had a multi stakeholder meeting to go through a rural draft policy framework. Jordan and Christine met with a number of people at the MED including Reg. But big difference in anticipated performance targets. A draft will go to stakeholders.

9. Updates/Issues:

1. Operational Separation – we managed to achieve the separation of Telecom in under two calendar years. The Q&A of the revised plan did address various issues we raised. It’s a good outcome. We wouldn’t have thought we’d get to here when we started with our stocktake submission. It’s not a bad separation and Telecom appears to see it as good as well based on comments from their bosses on separation day. The Minister used negotiations to put some extra agreements including the need to sort out TSO by June 30. Telecom signed this under pressure at the 11^th hour and have a problem.
   

[AP – Staff - Close watching brief of Telecom TSO]

2. Banking Code of Practice – they’ve reviewed it and it looks vastly more palatable. The outcome will be good for everyone.
   

3. Cyberlaw Fellowship – Simon has sent through timetable – looks good. There is a Cyberlaw fellow – Cynthia Laberge – need finality around research topic. Three topics were considered and she’s starting to firm out on a proposal that will likely be in the privacy area. Damian Broadley from AJ Park has been added to the management group. Last years research will be published more timely than the last.
   

4. Retention of text messages for law enforcement purposes – Both Telecom and Vodafone used to store content of text messages and Police find this useful. Voda told the Police this would stop and went to a new technology 6-9 months aso where they don’t store, although they can still intercept and store if there is a warrant. Telecom is moving to a technology where they won’t store them. The Police want them to keep storing them. The reason they are negotiating with the Police is the Minister has asked them to sort it out. It is a huge cost and there are storage cost issues. Voda and Police are opposed. The precedent is the issue for us, it could be applied to emails, web searches, Skype, etc. David has discussed with Privacy Commissioner and they would appear to be opposed to Police position. NetSafe sees benefit of retaining messages. This issue was debated at length with Privacy Code and it was going to mandate that telcos dump their information. It was changed after submissions by NetSafe and others. The Privacy Commissioner in the end put out a code that didn’t mandate that the information be dumped. Therefore the Privacy Commissioner may find it hard to resile from that.
   Doing this could encourage people to encrypt messages, making it harder for police, but are these criminals that sophisticated?
   

[AP – Staff – Draft a letter to Minister proposing that legislation in this would set a very bad precedent, and introduce letter to members discuss]

5. Copyright – Rick reported on the SOP
   

6. Netsafe has changed its name to NetSafe from The Internet Safety Group.
   

10. Any Other Business

TUANZ Telecommunications Day.

TUANZ rural broadband symposium in June/July.

NetSafe Cybercitizenship conference in July.

Meeting Closed: 5.00pm

Date of next meeting: Thursday 1 May 2008 at 3pm

Signed as a true and correct record:

…………………………………………………

David Farrar, Member, Chair